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23 September 2013

How Free is Free Choice?

Free
choice is one of the foundation stones of capitalism and democracy, two
philosophies that dominate life in today’s world. The freedom to choose is supposed to do two major things. Firstit
is supposed to ensure the maximization of benefit(or utility as
economists call it) for the individual. By being free to choose whatever the
individual wishes and assuming that the individual knows best what he wants and
what is best for him, a person will maximize their benefit and overall well-being.

Second,
free choice is supposed to power the free market mechanism. Because the
individuals are free to choose whatever they want, the suppliers who provide
the products and services best suited to clients’ needs are going to be
favored, while the suppliers who provide unsuitable products and services will
be eliminated from the market.

In
theory, free choice sounds like the best possible thing that can exist in the
world. It helps people maximize their well-being and at the same time rewards
the companies which sell the best products while at the same time punishing the
companies which sell the worst ones. Isn’t it great?

As you
may know already, free markets and maximization of well-being are more
theoretical concepts than real life. This is not to say that somehow-free
markets and increasing well-being do not exist in real life, but rather it is to
say that there are no absolutely free
markets and no real maximization of well-being.

In the
eyes of economics science the human is a near perfect reasoning machine, with
established and stable preferences, who has full information (knows everything),
who continuously makes cost-benefit analyses, who has absolute self-control and
who lives with only one goal in mind, namely maximization of utility or
self-benefit.In a nutshell, economics views man as homo economicus.

This
view on human nature is not restricted to the field of economics. It is
widespread in most aspects of social life, especially in the western world. Democracy functions on
pretty much the same principles, but despite its shortcomings, up to now there
is no better way to organize society.

The homo economicus view of human nature has
spread even in areas of social life that until recently were more paternalistic. Take for example medicine and health-care.
Most of us are used to go to the doctor and say that we feel bad, then the
doctor would do some tests, think a bit and come up with a diagnose. After this
the doctor would tell us what to do. This is paternalism. In some parts of the world, now, doctors give patients
the choice between two or more treatments. In other words, there is a shift
from paternalism (the doctor telling
you what to do) to libertarianism
where the patient is free to choose between treatments. Is this the way it
should be? It is up to each and every one of us to give the answer.

Apart
from the more philosophical question in the paragraph above, I believe there
are more significant questions to be answered. First, we should see if man is
actually homo economicus. Are we
really those rational agents that we
are believed by economists to be? The answer is quite simple and it is “No”.
This is not to say that humans are perfectly irrational, but rather to say that
the assumptions of all the characteristics of homo economicus are not fully met.

For example,
it is impossible for someone to hold complete information. This may be due to
the abundance of information and to the fact that our minds have limited
capacity; or it can be due to the fact that in many cases we do not make the
extra effort to search for all the information on a certain topic. Imagine that
you want to buy shoe polish. Would you go to all shops in the city to search
for shoe polish, collect all the information on quality, price and quantity,
then make a thorough cost-benefit analysis, choose one option and then go back
to the shop and buy it?

Unlimited
self-control is another thing that people do not have. We can exhibit
self-control, but by far we do not have an unlimited supply of it. We, quite
often, yield to temptation and to impulse when our self-control resources are
low.

Homo economicus is assumed to have one goal in mind namely maximization of self-benefit.
But, does this really happen? Sometimes it does sometimes it doesn’t, but this
is not to say that people do not want to have as much self-benefit as possible.
Rather it is to say that we quite often settle for good enough solutions and not go for the best solution. It is a difference between maximizing and sufficing
and most of the time we are happy with sufficing.

The second
question we should answer is how free is free choice? Are we actually free to
choose anything? The answer to this question is both “yes” and “no”. Freedom of
choice in itself is usually not restricted in many countries, so in principle
we are free to choose anything. At the same time what we choose is very much
influenced by factors other than our own free will.

Let me
give you a simple example. If you go out for dinner at an Italian restaurant,
you will end up eating some kind of Italian food and for sure you will not have
Chinese food. The mere existence of a choice set, in this case the restaurant
menu, limits one’s free choice.

If you
believe that the idea of not having Chinese food in an Italian restaurant is
silly, consider the following example. In school cafeterias in the UK fried
potatoes are not any longer on display, but are available if someone asks for
them. To put things simply, the option of eating chips is available but not
salient. The result of this change was the decrease of consumption of chips.

In the
aforementioned examples, free choice is not
so free because some options are not in the choice set one is presented
with. At the same time, (free) choice is influenced by the composition of the
choice set beyond not choosing what is not in the choice set; it is influenced
by how the choices are presented.

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Nick NAUMOF

Nick Naumof has studied people from different scientific perspectives ranging from economics to consumer behavior, behavioral economics and evolutionary psychology.
Author of “It Makes (No) Sense – In Between the Joy of Gaining and the Fear of Losing”, Nick Naumof has a unique mix of skills that allow him to translate the academic insights of behavioral science into practical applications in business and service design.
With more than seven years’ experience in developing and delivering workshops and training programs, Nick Naumof offers highly engaging and intriguing learning experiences.